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By that standard, how do you justify Amazon's $170B market cap, given it's notoriously low profit margins?

toomuchtodo 13y ago
Amazon has built a logistics machine that could entirely replace brick and mortar retail, books as we know it (ebooks), and so on. Dropbox stores files. On Amazon, by the way.
- argumentum 13y ago
  What you said is correct now, but when Amazon was Dropbox's age, it was "merely" an online bookstore. Over time, it has transformed into the company it is today, which has a justifiable, in my view, market cap of 20X Dropbox's "valuation". But you didn't justify this number in terms of profitability, but rather by the value it adds to the economy. We don't know what Dropbox is going to be, yet, but it's already far more than a service that "stores files". It's the default way students and startups share files and work together. That's a pretty good market to build on. How much would a company be worth if it was the default way most people worked together? What chance does Dropbox have of being that company? Those are the factors that justify $8B.
  - toomuchtodo 13y ago
    My argument is that there is no barrier to entry. Want to compete against Amazon? The amount of cash you would need is enormous. That's Google/Microsoft/Apple scale (and, of course, Amazon). Dropbox? Very little barrier to entry. Just like them, you could use S3.
    - argumentum 13y ago
      It's not a good argument .. traditional barriers to entry are never as insurmountable as they may seem at first. I doubt Jeff Bezos was concerned with the "amount of cash" needed to compete with Border's or Barnes & Noble. The real barrier to entry is not competition from other companies, it is building a great product/service/company yourself. If it were so easy to "use S3" to start a Dropbox, why is there only one Dropbox? What's stopping anyone from "using EC2" to build another Facebook? How exactly do you explain how Google/Apple/MS/etc became Google/Apple/MS/etc?
      - toomuchtodo 13y ago
        > How exactly do you explain how Google/Apple/MS/etc became Google/Apple/MS/etc? The moat is much higher than it was 5-10 years ago. Do you have billions of dollars that you're sitting on that you could use to compete against Google/Apple/MS?
        argumentum 13y ago
        I think you either meant the "moat" is a lot deeper .. ;) You'd be in an extreme (and incorrect) minority with that view anyway. Clearly it's much cheaper and easier to start on online bookstore today than 5-10 years ago.
awj 13y ago
I don't think your comparison makes sense. When Amazon was at the stage Dropbox is at now investors were taking a risk I thought was insane. That risk paid off, but there are countless examples that didn't. Amazon now practically owns their space and has inexplicable license from the market to reinvest in infrastructure or outright avoid profit. Few other companies are in this position, so comparing valuations of Amazon and Dropbox is assuming many things I wouldn't agree to. My point was about why people get cynical about a company that is actively making money but are more lenient on ones that aren't. When profit is an uninteresting point in the discussion, it tends to not be discussed.
- argumentum 13y ago
  > That risk paid off, but there are countless examples that didn't If every risk paid off, there's no such thing as a risk. These investors are making the calculation that DB has some % chance of being in a similarly dominant position as Amazon is today.

Amazon has built a logistics machine that could entirely replace brick and mortar retail, books as we know it (ebooks), and so on. Dropbox stores files. On Amazon, by the way.

argumentum 13y ago
What you said is correct now, but when Amazon was Dropbox's age, it was "merely" an online bookstore. Over time, it has transformed into the company it is today, which has a justifiable, in my view, market cap of 20X Dropbox's "valuation". But you didn't justify this number in terms of profitability, but rather by the value it adds to the economy. We don't know what Dropbox is going to be, yet, but it's already far more than a service that "stores files". It's the default way students and startups share files and work together. That's a pretty good market to build on. How much would a company be worth if it was the default way most people worked together? What chance does Dropbox have of being that company? Those are the factors that justify $8B.
- toomuchtodo 13y ago
  My argument is that there is no barrier to entry. Want to compete against Amazon? The amount of cash you would need is enormous. That's Google/Microsoft/Apple scale (and, of course, Amazon). Dropbox? Very little barrier to entry. Just like them, you could use S3.
  - argumentum 13y ago
    It's not a good argument .. traditional barriers to entry are never as insurmountable as they may seem at first. I doubt Jeff Bezos was concerned with the "amount of cash" needed to compete with Border's or Barnes & Noble. The real barrier to entry is not competition from other companies, it is building a great product/service/company yourself. If it were so easy to "use S3" to start a Dropbox, why is there only one Dropbox? What's stopping anyone from "using EC2" to build another Facebook? How exactly do you explain how Google/Apple/MS/etc became Google/Apple/MS/etc?
    - toomuchtodo 13y ago
      > How exactly do you explain how Google/Apple/MS/etc became Google/Apple/MS/etc? The moat is much higher than it was 5-10 years ago. Do you have billions of dollars that you're sitting on that you could use to compete against Google/Apple/MS?
      - argumentum 13y ago
        I think you either meant the "moat" is a lot deeper .. ;) You'd be in an extreme (and incorrect) minority with that view anyway. Clearly it's much cheaper and easier to start on online bookstore today than 5-10 years ago.

awj 13y ago

I don't think your comparison makes sense. When Amazon was at the stage Dropbox is at now investors were taking a risk I thought was insane. That risk paid off, but there are countless examples that didn't. Amazon now practically owns their space and has inexplicable license from the market to reinvest in infrastructure or outright avoid profit. Few other companies are in this position, so comparing valuations of Amazon and Dropbox is assuming many things I wouldn't agree to. My point was about why people get cynical about a company that is actively making money but are more lenient on ones that aren't. When profit is an uninteresting point in the discussion, it tends to not be discussed.

argumentum 13y ago
> That risk paid off, but there are countless examples that didn't If every risk paid off, there's no such thing as a risk. These investors are making the calculation that DB has some % chance of being in a similarly dominant position as Amazon is today.